On Sat, May 22, 2010 at 4:42 PM, joe & leigh <gass20@aol.com> wrote:
> randy it would be helpful if you read my shortput paper in the file section.
I don't see an income goal mentioned there. What "income goal" did you meet when you collected the $10,900?
> what do you mean rolling....i'm not rolling anything
Selling the Aug $68 call against the stock you had put to you for $68 is pretty much equivalent to if you had rolled the May $68 put to an Aug $68 put. That's why I said "more or less rolling".
For example, at expiration, the May $68 put should have been worth $2.93. The Aug $68 put is currently bid at $6.68 -- $2.93 of it intrinsic and $3.75 of it extrinsic. So, theoretically, rolling the May $68 put to the Aug $68 put would have gained you $3.75, instead of letting it get exercised and writing the call against the stock for $3.40 (which you may or may not be able to get Monday).
Theoretically, the May $71 put could have been rolled to the Aug $71 put for income of $2.46, instead of the $2.16 you're getting for the covered call.
There also should be a dividend payment before August expiration.
Plus, you would have had time decay of the new put working for you over the weekend -- not so important on 3-month options, but I usually write next-term options. For example, there would only be 11 days between the 6/19 and 6/30 IWM expiration, so the time decay over a weekend is more important. So I generally prefer to roll prior to expiration instead of getting exercised.
> and i have no clue what you mean borrowing against the future instead of earning income. that is earned income ask my tax
> accountant. that money will be generated and withdrawn monday. i have borrowed against nothing and the premiums are
> clearly income...drjoe
I say "borrowing against the future" because that's what the extrinsic time values on options are. In the next 3 months, your OTM call could be further OTM and would generate less income -- unless you move it further out, or less OTM. You can continue to collect "income" while your position gets deeper and deeper under water. That, to me, is borrowing against the future.
For example, here's what I see from your entries:
| Description | At Risk | Income | Return | Annualized |
|---|---|---|---|---|
| Sell 10 IWM Aug $58 Put @ $3.00 | $58,000 | $3,000 | 5.17% | 20.69% |
| Sell 10 SPY Jun $99 Put @ $2.15 | $99,000 | $2,150 | 2.17% | 26.06% |
| Sell 7 IWM Aug $68 Call @ $3.40 on $68 assigned | $47,600 | $2,380 | 5.00% | 20.00% |
| Sell 7 IWM Aug $71 Call @ $2.16 on $71 assigned | $49,700 | $1,512 | 3.04% | 12.17% |
| Sell 6 IWM Aug $59 Put @ $3.19 | $35,400 | $1,914 | 5.41% | 21.63% |
| Total | $289,700 | $10,956 | -- | 21.06% |
But the two call positions were written while the stock being held is $6,200 under water from the assignments. I would think your "income" needs to reflect that discrepancy.
What do you do with those two positions if IWM is $55 or $60 at August expiration?
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